Energy News Beat Publishers Note: DRW has a reputation for speaking his mind. Sometimes people don’t like to hear the opposing side if it does not match their beliefs, or their miss information. We like to listen to both sides of any discussion, and regarding the oil and gas drilling in Colorado, DRW is spot on. There are new regulations in Colorado, and there are solutions to keep drilling and while meeting the new state regulations (We know).
Extraction has emerged from BK, and as 2021 made 2020 disappear, the refreshed capital structure, management and board make the company totally different!! OK, that’s a lie, but I tried to say something nice….
If we are honest (and we are because that’s what we do), the only difference is the creditors are now the equity and the old equity is wiped out. Like WLL and CHK before them, the creditors found that the assets, and the market for selling those assets, looks poor with the wide bid-ask going nowhere (buyers might pay $45/bbl, but sellers want $55 and PUDs become economic between those end points). So the net is that creditors get to step up to the roulette wheel to see what happens. Timing is everything. Ask anyone who was short the market ready for a Biden win (me); or short because Georgia was going to go Democrat (me)… but right now markets only go up and the sequel to ‘The Big Short’ will be incredibly anticlimactic. I knew it was a bubble… and I timed it well. I digress. Back to Colorado.
When you overlay capital structure with Colorado operating risk, and it’s quite a conundrum. 2000’ setbacks, tougher emission standards, anti oil and gas rhetoric despite 3500 Aspen homes finding out what winter is like without natural gas for 5 days and double the notification requirements for permits makes operating here more challenging by the day. To that point, it is why we need a ‘Lord of the Rings’ style “there can only be one company to own them all.” With the BCEI/HPR process running its course and NBL being swallowed by CVX, the chairs are being taken away but more needs to happen.
My take: If you are pregnant with Colorado risk already, you might as well have twins. And if your equity has debt risk and needs a catalyst for a big refi, equity raise and bolster NAV, I love OXY-PDCE.
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